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AAFA ANNUAL EXECUTIVE SUMMIT: CHINA AT THE TIPPING POINT
Deborah Weinswig Executive Director—Head, Global Retail & Technology
Fung Business Intelligence Centre
March 18, 2015
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China’s Mall Boom
Source: Na+onal Bureau of Sta+s+cs China
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Beijing
Chen
gdu
Chon
gqing
Dalian
Guangzho
u
Harbin
Shanghai
Shen
yang
Shen
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Tianjin
Wuh
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Share of Mega Malls in Selected Ci3es
Share of Shopping Centers (GFA> 100,000sqm) among all shopping centers
• The China Chain Store & Franchise Association (CCFA) estimates that around 300 new malls are opened in China each year and that the total number of malls will reach 4,000 by 2015.
• Nine out of the top Ten newly completed malls are in China.
• Malls account for the majority of China’s commercial property supplies: 68.3% (Tier 1 cities) and 61.6% (Tier 2 cities).
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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Total Investment in China’s Commercial Proper3es
CommulaQve Commercial Property Development and Investment (in Billions USD) YoY Growth %
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What’s Driving China’s Mall Boom?
Urbanization Based on City Clusters and Rise of Middle Class
169.55 million Chinese households will reach $50,000 versus 2.76 million in 2012. (EIU)
Three mature clusters
3.2% of national total land mass
17.3% of national total population
35.1% of national total GDP
30.2% of national total sales of consumer goods.
Eight middle-weight clusters
11% of national land mass
30% of national population
37.8 % of national GDP
34.2% of national total sales of consumer goods.
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What’s Driving China’s Mall Boom?
• Consumer demand a “lifestyle” shopping experience some malls in China dedicate 25% of total floor area to entertainment and dining facilities. High-end Chinese malls also doubles as art galleries and fill with culture elements.
• Kid-related facilities at malls attract traffic China’s one-child policy allows one kid to attract spending of two parents and six grandparents in a family.
• Malls are favored property developers due to the tightening government regulation on residential property market
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China Is the World’s Largest Online Market
Source: iResearch
• Robust Ecommerce Growth The transacQon value of China’s online market increased by 39.4% YoY, to reach ¥1.84 trillion in 2013, accounQng for 7.9% of the country’s total retail sales. By 2017, total online sales are expected to reach ¥4.45 trillion yuan, accounQng for 12.4% of total retail sales.
• Growing Online Popula3on China’s online populaQon is growing rapidly to 648 million as of June 2014,including, 127 million Rural internet users
• Mobile Shopping Gaining Trac3on. The mobile pla_orm is now a highly popular sales and markeQng channel. iResearch esQmates that the total transacQon value of mobile shopping will exceed ¥3,207 billion by the end of 2017, up from ¥274 billion in 2013. There are 527 million mobile users in China
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2010 2011 2012 2013 2014 E 2015 E 2016 E 2017E
China Ecommerce Growth
China Ecommerce Sales in Billions USD YoY Growth
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2011 2012 2013 2014 E 2015 E 2016 E 2017E
China Mobile Commerce Growth
China Mobile Commerce Sales in Billions USD
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Major Trends in Chinese Ecommerce
• Home categories are a new growth area in Chinese e-commerce. Local brands still dominate home category online sales.
• Overseas merchants leverage 7 FTZ pilot cities and bonded warehouse to sell in China.
• Chinese tourists shop overseas and demand same high quality goods when return home
• WeChat shops and its “B2C2C” model (recommended purchase by friends) have huge potential to disrupt the two-player market of Alibaba and JD.com.
• Launching stores on major e-commerce sites is becoming increasingly expensive due to high marketing charges and registration capital requirement.
• Community shopping malls are getting popular.
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Top 10 Trends for 2015 1. Consumer market sees steady growth; rational consumption a norm
2. Institutional reform of distribution sector, better regulated
3. O2O competition intensifies
4. Wholesale markets undergo transformation and upgrade
5. Luxury market slows; “affordable luxury” gains
6. Department stores and large supermarkets revamp; focus on community stores
7. Innovation drives operational transformation
8. New era of consumerism
9. Catering market under transformation; mass dining trend
10. Express delivery firms scale up
Source: China Business Herald Research Ins+tute, China General Chamber of Commerce (and Expert CommiAee of), Fung Business Intelligence Centre and Fung Group